18.03.2013

Essex Crane cuts losses

US crane company Essex Crane has released its 2012 results, with improved rental revenues and reduced losses.

Looking at the year as a whole, total revenues increased 9.5 percent to $98.26 million, thanks to a pick-up in rental business and strong sales of used equipment, offset by a steep decline in new equipment sales. The company’s pre-tax loss was reduced from $27.9 million in 2011 to $18.2 million last year.

Moving to the fourth quarter, revenues were up by a more modest three percent to $12.85 million, however this masks a 20 percent spike in rental revenues – dragged down by low sales of new and used cranes, with new crane invoicing delayed due to late deliveries from manufacturers. This should though translate into a strong first quarter for sales.

Pre-tax losses were cut in half for the quarter, from $7.35 million in 2011 to $3.65 million in 2012.

Crawler crane utilisation increased to 44.8 percent compared to 43.4 percent last year, while average monthly rental rates were up $387 to $17,947, the highest since 2009.

Rough Terrain crane utilisation was 61.9 percent compared to 51.8 percent a year earlier, while utilisation for larger tower cranes and hoists increased to 56 percent from 54.7 percent. While self-erectors increased to 41.6 percent from 33.1 percent.

The company reduced net debt by $10.9 million and said that capital expenditure for 2013 will be $2 million, plus the proceeds from used crawler crane sales from the fleet.

Chief executive Ron Schad said: "We have seen increases in activity in most of our end markets on a year over year basis, with the largest increases in the power and petrochemical sectors. The expected duration of new crawler crane orders has increased by 9.6 percent, providing greater revenue visibility. Utilisation on our hydraulic heavy lift crawler cranes, which represent 70 percent of the value of our crawler crane fleet and 50 percent of our entire fleet, equalled 63.8 percent for the quarter. These cranes have a higher lifting capacity and typically command a rental rate nearly twice that of traditional crawler cranes. We are selectively increasing rental rates for certain categories of our heavy lift crawler fleet.”

“I believe that we are still in the very early stages of what will be a gradual recovery for crawler crane utilisation and rental rates. Besides an improving environment for our rental equipment, we are pleased with the results from many of the operating initiatives that we announced in the first half of 2012.”

In January 2013, we sold the remaining aerial work platforms and forklifts from our rental fleet and have now exited from this market, where we lacked a competitive advantage and were not able to leverage our crane expertise. We will continue to identify opportunities to sell rental fleet assets that were underutilised during historic peak demand periods and use the proceeds to reduce outstanding debt. During 2012, we sold $17.3 million of non-core and excess rental fleet assets at approximately 109.3 percent of appraised orderly liquidation value."

"Thus far in 2013, we are continuing to experience a gradual recovery across all of our business lines. For example, since the beginning of the year we have increased the number of crawler cranes on rent by approximately 10 percent. Rental rates continue to be firmer and where utilisation warrants it, we are raising rates. We expect that our parts and service business will continue to provide a highly predictable earnings stream and believe that based on signed orders in hand, new equipment sales are likely to be meaningfully higher in the first half of 201.”

Vertikal Comment

While the Essex rental business is clearly improving steadily, it looks as though the old Coast Cranes sales and distribution business is suffering or even withering under Essex ownership. This may though prove to be a timing and adjustment thing, which will correct itself in the first half of 2013.

Business is on the up, but still has a long way to go before it is ‘cooking on gas’, however with its funding secured well into 2016, the company has time and when rates and utilisation both climb rental business profitability bounces back very quickly.